Why Cleaning Strategy Matters in Dairy Due Diligence
PE firms evaluating dairy processing acquisitions focus on capacity, margins, and customer concentration. What they often miss: the gap between stated production hours and actual uptime, which comes down to one thing—cleaning strategy.
A single-circuit CIP system cleans one line, one tank, one set of pipes at a time. Sequential cleaning. While Line A is being cleaned, Lines B and C sit idle. The operational reality: you're not running 24/7 production. You're running production minus cleaning time.
A multi-circuit CIP system runs parallel cleaning across multiple lines and equipment simultaneously. Different equipment, different cleaning solutions, different cycle times—all running together. The operational difference is stark: Lines stay in production longer, and cleaning happens without stopping the operation entirely.
The Economics That Don't Appear in EBITDA Analysis
Here's what shows up on a facility tour: capacity utilization rates. Here's what doesn't: the hidden hours. A dairy plant running a single-circuit system may report 85% utilization. That number includes cleaning downtime built into the calculation. Multi-circuit systems eliminate the need for equipment disassembly, minimizing production interruptions and directly impacting overall equipment effectiveness (OEE).
The time savings are measurable. Multi-circuit CIP systems cut cleaning time by 50% for dual-circuit configurations compared to running sequential single-circuit cleaning. A facility running extended cleaning windows daily can recover hundreds of production hours annually without equipment expansion.
Labor impacts flow from this too. Single-circuit facilities often require dedicated sanitation crews running overnight or weekend shifts. CIP systems eliminate most manual cleaning work, allowing staff to focus on higher-value activities while reducing exposure to cleaning chemicals. This means sanitation hours can be reassigned to maintenance backlog, preventive upkeep, or product innovation rather than hiring additional headcount.
Chemical and water consumption also improve. Automated CIP minimizes mistakes by executing procedures correctly, ensuring each cleaning cycle adheres to required standards while decreasing contamination risks through monitoring sensors.
Why PE Firms Undervalue This
Dairy acquisitions typically trade on EBITDA multiples. CIP system configuration doesn't appear on financial statements. Neither does "hours available for production" or "sanitation labor as percentage of total labor." Without these metrics, the difference between single and multi-circuit operation stays invisible during due diligence.
CIP cycle optimization can increase productive capacity through downtime reduction. Optimizing cleaning operations can yield a 5% capacity increase—potentially translating into eight additional production runs annually. A facility showing steady EBITDA with single-circuit CIP may have 10-15% margin expansion potential through recovered production hours and labor optimization that never appears in initial valuation.
The Audit Approach
Operational due diligence should include facility walk-throughs that assess cleaning cycles, downtime windows, and labor scheduling. Production schedules should be analyzed against theoretical capacity to identify where cleaning becomes the constraint rather than equipment capability.
Understanding CIP architecture—whether the system enables parallel cleaning—directly impacts post-close margin expansion potential and realistic capacity planning. This isn't speculative operational improvement. This is calculating what actual production hours the facility can deliver.
For companies preparing for strategic transaction or capital expansion, CIP system design should inform both valuation and post-close operational roadmaps. Technical partners with food manufacturing specialization can assess CIP economics and quantify production hour recovery during due diligence phases.
